JERSEY Law and Practice Contributed by: Paul Burton and David Allen, Maples Group
At signing, an equity commitment letter is used to pro - vide contractual certainty of funds for sponsor contri - butions. For higher-value transactions, it is common to see debt and security documents agreed by sign - ing (but left unexecuted) and confirmations given by the buy-side in relation to this to provide comfort to sellers. 5.4 Multiple Investors Both joint venture and syndicated consortium inves - tor transactions are common in Jersey, particularly in infrastructure asset deals. While not entirely “com - monplace”, the steady rise in pre- or post-closing co-investments involving multiple private equity spon - sors, or sponsors and their most valued limited part - ners, is starting to represent a greater proportion of all private equity deals. Co-investment structures are an increasingly popular way to syndicate the sponsor equity contribution to be made. It is not uncommon to see primary investment opportunities initially involve private equity sponsors acquiring minority interests in target groups pending enterprise valuation adjustments and similar. Joint venture-style arrangements between private equity fund sponsors and corporate investors are increas - ing in frequency. There was a definite uptick in North American spon - sors involving corporate, sovereign and/or sector spe - cific co-investors in the early stages of a proposed transaction. It is understood that this assists with bidder profiling in granting exclusivity, or as part of participating in a competitive auction process. 6. Terms of Acquisition Documentation 6.1 Types of Consideration Mechanism There is generally no restriction on the type of consid - eration that can be offered on a private treaty sale or negotiated offer. Consideration can therefore include, among other things, cash, loan notes and shares. In a Takeover Code-governed transaction, for a mandatory offer, the consideration must be cash, or be accom - panied by a cash alternative, and it must comply with minimum consideration requirements.
The nature of the underlying asset, sponsor approach/ appetite and certain transaction-specific requirements are all factors that contribute to the form of considera - tion structure used in Jersey private equity deals. No predominant form of consideration structure is used in these types of transactions: fixed-price, locked-box and completion accounts mechanisms are variously seen. The protection afforded by private equity buyers and sellers in relation to the consideration mechanism is generally the same as the protection provided by corporate buyers/sellers. This includes earn-outs, deferred consideration, anti-embarrassment mecha - nisms and (less frequently) consideration collateral or security. 6.2 Locked-Box Consideration Structures The use of locked-box consideration structures in Jersey private equity transactions is not predomi - nant. The specific features and uniqueness of each separate transaction generally determine whether a completion accounts or locked-box consideration mechanism is employed. Levying interest charges on any value leakage that is not permitted leakage is not common or market standard in Jersey. 6.3 Dispute Resolution for Consideration Structures In many private equity transactions, locked-box con - sideration structures do not have specific dispute resolution mechanisms. In deals where completion accounts are required, specific dispute resolution mechanisms are more common, where either party may refer a dispute for determination by an inde - pendent expert or auditor. General dispute resolution provisions under a share sale and purchase agree - ment often refer to arbitration proceedings, as agreed between the parties. 6.4 Conditionality in Acquisition Documentation Conditionality is standard in private equity transac - tions and would include any necessary shareholder and regulatory (including competition or antitrust) approvals, and other matters that are not within the bidder’s control or are dependent solely on the bid - der’s subjective judgement. Conditionality for financ -
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